Asset managers can make assumptions about capital market regimes in terms of economic policy. On a basic level, one can break down the business cycle into quadrants or a four-phase matrix: economic contraction versus expansion, and high or low inflation regimes. “You can bifurcate regimes in a number of ways, and they don’t have to be mutually exclusive,” says Duy Nguyen, Head of Global Advisory Solutions at Invesco. “But this perspective allows those who are managing money to think about what will happen in the future, and how that behavior has manifested in the past.”
As investors become increasingly focused on outcomes, portfolio managers are tasked with developing strategies to manage the portfolio toward those outcomes, prioritize multiple objectives, and incorporate a range of constraints and multi-period challenges into the plan.